Good morning and welcome to this HealthSpring Conference Call to review its financial results for the third quarter and nine months ended September 30, 2008. The financial results were issued earlier this morning. If you did not receive a copy of the press release, you may find a copy under the Investor Relations tab on the HealthSpring website, which is www.healthspring.com.

Before we begin, HealthSpring wishes to express that some statements made in this call will be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual performance of the company may differ from that projected in such statements. Investors should refer to the statements regularly filed by the company with the Securities and Exchange Commission for a discussion of those factors that could affect the company's operations and the forward-looking statements made in this call.

The information being provided today is as of this date only, and HealthSpring expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any changes and expectations. In addition, certain non-GAAP financial measures may be covered in this presentation. These non-GAAP measures are reconciled to the most comparable GAAP measures in the press release, or on the company's website.

At this time, I'll turn the call over to Mr. Herbert Fritch, Chairman, President and Chief Executive Officer of HealthSpring. Please go ahead, sir.

Herbert Fritch

Thank you, operator. Welcome to our 2008 third quarter conference call. We are pleased to report another strong quarter, leading us to improve our earnings guidance for the full year. As expected our medical cost trends and our core Medicare Advantage business continue to improve during the quarter. These improving cost trends and higher than anticipated premium increases have year-to-date MA MLR standing at 78.2%, which gives us confidence in both maintaining our annual MA MLR guidance at or below 79% and increasing our 2008 earnings per share guidance range to $2.10 to $2.20.

A slight disappointment for the quarter is the continuation of lower margins on our stand-alone PDP business. We now understand the drug utilization patterns this year are different from our prior experience particularly in California, New York, which were new regions for us in 2008, have led to a delayed turn to profitability in this line of business and higher MLRs than originally anticipated.

Accordingly we are revising our PDP MLR upward to 89% for the full year. Fortunately, we anticipated these trends in our 2009 PDP bid submissions, which resulted in being below the benchmarks in 24 of the 34 CMS PDP regions for 2009. Seven less regions than we qualified for in 2008. California, New York represent two of the seven regions we are now in the, we won't be in as of January 1, 2009.

Based on recent data release to us by CMS, we expect to have approximately 260,000 to 270,000 members in the 24 regions as of January 01, 2009, compared to the 272,469 members in 31 regions at quarter end. We also expect our MLRs and operating margins on these members will improve in 2009. Kevin will speak to more details regarding our financial results in a moment.

As you are aware, sales and marketing activities for annual open enrollment began October 1st. Each of our plans adapted sales and marketing activities to conform the recent legislation and CMS regulations. Not withstanding the current confusion by CMS and others on sales commission structures, we are currently active in our enrollment efforts. In that regard, we feel our Medicare Advantage product suite and benefit structures are competitive in each of our respective markets.

On the membership growth front, I am please to report that as of October 1, 2008 and following the quarter end, our Texas plan added almost 3,000 members in the Rio Grande Valley. In connection with our acquisition of Medicare Advantage plan formally operated by the Valley Baptist health system and added benefit to the acquisition was a long-term facilities contract we entered into with Valley Baptist.

We are hopeful that opportunities to make these types of acquisitions in our existing markets become more common places, smaller plan operators feel the increasing regulatory and financial burdens associated with the Medicare Advantage program.

In preparation for expected growth and more acquisition opportunities, we have recently taken steps to add depth to our executive management team. I am pleased to report that effective tomorrow Mike Mirt, who I know and whose abilities, I ever expected for many years will become our new President. Mike is well known as a skillful results driven operator. He has extensive experience in managed care executive positions most recently as COO of AmeriChoice and before that as President of CIGNA HealthCare’s western region. His reputation for integrity and team building should make his transition to be our President in a smooth one. I will of course continue as CEO, but I gladly relinquish the President title to a man of Mike’s calibre.

Also a fact that tomorrow Sharad Mansukani, a current Board Member will take on a part-time role as our Executive Vice President, Chief Strategy Officer. In such capacity, Sharad will assist me in among other things developing new network relationships, expanding physician engagement strategies, identifying and evaluating potential acquisitions and interacting with CMS, our primary regulator and our State and Federal legislative constituencies. Sharad is a former practicing physician and senior advisor to CMS. He understands our culture and our mission and believes our model of aligned incentives for physicians can be a model for meaningful healthcare reform that addresses both cost and quality improvement. We welcome both men aboard.

We are also pleased that the steady progressive are expanding innovating delivery system models. During the third quarter, we opened our third advanced medical home practice model in Houston. Our initial prototype in Gallatin, Tennessee continues to evolve and expand. We are now adding onsite pharmacy capabilities to this facility. The progressive physician practice staffing the site has been active in our partnership for quality program for over four years now. During that time, their compliance with evidence-based guidelines has increased from the 30% to 40% range, typically seen in fee-for-service primary care practices to the 80% to 90% range.

The improvement in chronic care management and additional preventive medical services as resulted in better care at a lower overall cost. This groups MLR performance continues to be one of the best in our network. As we have said before, this is a focus area for us and we have continued to make progress expanding the partnership for quality program and it should effectively cover about 35% of our membership by end year and over 50% next year.

The success of these models has caught the attention of several large medical groups and these groups are driving our expansion plans for 2009 and 2010. We continue to believe that we are well positioned for the future. We think Medicare Advantage rates begin to trend toward parity with fee-for-service cost in 2011, irrespective of which candidate wins the presidency. We believe its smaller, more tightly managed networks like ours will be the winners in this new environment.

With that I would like to turn the call over to Kevin.

Kevin McNamara

Thanks, Herb. We were quite pleased with our performance including our reported quarterly net income of $29.4 million or $0.53 per share, an increase of 36% compared to the 2007 third quarter EPS of $0.39. Significant factors having a positive impact on 2008 third quarter were increases in the PMPM rates for our Medicare Advantage and PDP members.

Year-over-year improvement in our MA including MA-PD, MLR and inclusion of our Florida operations Leon Medical Centers Health Plans which we acquired on October 1, 2007. On a negative side, while pleased with our 113% increase in our PDP membership and MLR erosion of 485 basis points year-over-year caused a negative comparison to the prior year contribution of our PDP business.

Moving to the specifics, we reported 156,305 Medicare Advantage members at the end of the third quarter reflecting year-to-year growth of 23%. 27,204 or over 90% of this growth is from the inclusion of LMC Health Plans in our results. Growth during the lock-in period this year has been better than we expected. During the third quarter, we added approximately 2,350 new members, as compared to 1,350 during the third quarter of 2007.

As Herb mentioned during his remarks, the combination of better lock-in results and the acquisition of approximately 3,000 members in Texas lays us to now guide to 161,000 to 162,000 MA members at yearend. PDP membership of 272,469 is up 113% year-to-date. We have updated our guidance to assume year ending PDP membership of approximately 280,000.

Total revenue in the second quarter was 527.7 million, an increase of 161.4 million, a 44% versus the prior year third quarter. Medicare Advantage revenue was up 45% or $140.6 million to $455.8 million, compared to $315.2 million in the prior year. Primary drivers of this increase were an increase in the MA premium PMPM and the inclusion of the Florida operation in our 2008 results.

For the three months, MA premiums PMPM increase 12% year-over-year, exclusive of the LMC Health Plans results. For the nine months ended September 30, 2008 is reported MA premiums PMPM of $1,011, an increase of 19% year-over-year, a 14% when you exclude Florida. PDP premiums were $59.1 million in the third quarter of 2008, an increase of $32.2 million or 119% versus the third quarter of 2007. This increase was driven by the 113% increase in PDP membership and PDP premiums, which increased 1% year-over-year.

Year-to-date PDP premiums PMPM are $88, an increase of 6% over 2007. Please remember that quarter-to-quarter and year-to-year percentage changes in PDP PMPMs are significantly affected by risk on our adjustments. Fee revenue for the quarter increased $1.5 million, as compared to the third quarter of last year. The increase is primarily the result of higher premiums and management fees associated with IPAs that have come online since last year.

Investment income was down 44% or $3 million in the quarter due to the significant decrease in investment yields. Most of our cash investments are held in floating rate instruments, so this decline is not unexpected. We expect investment income will continue to decline in the fourth quarter of 2008, due to the refunding of $111.5 million in final 2007 Part D settlements.

Total medical expense in the quarter was $411.7 million, an increase of $123.4 million, or 43% versus the prior year's quarter. With respect to the components in the relative metrics, MA medical expense was $361.1 million, an increase of $102.8 million, or 40% versus the comparable prior year quarter. MA medical expense PMPM was up 14% over 2007 to $774. Of this increase, 7% is attributable to the inclusion of LMC Health Plans and 7% relates to cost trends in the rest of our health plans.

The MA MLR was 79.2% for the current quarter versus the prior year's 81.9%. The improvement year-to-year was primarily attributable to increases in premiums PMPM and excess of medical trends. For the nine months ended September 30, 2008, the MA MLR was 78.2% as compared to 80.5% in 2007, adjusting for out of period risk adjustment the MA MLR was essentially flat year-over-year at 79.2%. PDP MLR in the 2008 third quarter increased to 85.1% versus the year ago 80.2%. Year-to-date the PDP MLR was 93.3% versus 88.8% in 2007.

As Herb mentioned, our 2008 results for the PDP business has been disappointed. The higher medical trends in this line of business have continued in to the third quarter and we do not expect and to improve during the fourth quarter relative to last year. A great deal of this increase cost is coming from our membership in California and New York. These are the two regions, where we picked up a bulk of our auto-assigned membership in 2008.

We are once again increasing our PDP MLR guidance to approximately 89%. While we still expect incremental profitability from our PDP business in calendar year 2008 versus 2007. The erosion in margins will cause this portion of our business to fall well short of our plan is outlined at the beginning of the year.

Fortunately outperformance in the rest of our business is made out for [dismiss], while the publishing of the results of the 2009 bid results, we expect that the loss of these higher cost regions and the additional membership in existing regions should help to improve the profitability of the PDP business in 2009.

SG&A expenses for the quarter were $58.6 million, an increase of $18.5 million or 46% versus the prior year. SG&A expenses as a percentage of revenue came at 11% of total revenue in the 2008 third quarter, compared to 11% in the third quarter of 2007. Year-to-date SG&A as a percentage of revenues stands at 10.8%. On a sequential basis, SG&A expense increased $2.7 million or 5%. The primary driver of this increase was activities associated with preparation for the 2009 open enrollment marketing period, which began in October. We continue to expect SG&A to remain seasonally weighted to the first and fourth quarters, as a result of marketing and commission cost associated with the limited open enrollment period.

Moving guidance below the EBITDA line appreciation and amortization expense in the 2008 third quarter increased $4 million versus the 2007 third quarter, primarily as a result of amortization expense associated with LMC Health Plans acquisition. Interest expense in the 2008 third quarter increased 4.4 million over the 2007 third quarter, as a result of the interest incurred on the company’s $300 million term credit facility entered into in the fourth quarter of 2007.

For the first three quarters of 2008, the decline in interest income and interest expense has been relatively consistent and that’s we have been somewhat hedged in an unplanned way. Given the recent movement in LIBOR, we do not expect this phenomenon to continue. Thus in October, we entered into an interest rate swap transaction for $100 million of our outstanding debt. We felt that the predictability to the interest cost on a sizable proportion of fixed rate debt was wise in light of the current credit markets. We fix this portion of our debt in an effective all in interest cost of approximately 6.5%.

During the quarter, there was no share repurchase activity. On year-to-date basis we have repurchased 1.6 million shares for $28.4 million. We still have approximately $21.6 million remaining on our current repurchase authorization.

Moving to the balance sheet and cash flow, as we mentioned to you during our second quarter earnings call, we received sizable cash payments from CMS for 2007 retro risk adjustment payments during the third quarter. Thus as though September 30, 2008, our balance sheet reflects a significant increase in our cash and cash equivalents to $427.2 million versus $304.7 million at June 30, 2008.

Our cash balance should decline in the fourth quarter, due to the Part D settlement activity highlighted in our press release. Unregulated cash at quarter end was $58 million. We had $275.3 million of borrowings under our long-term credit facility at September 30. Accounts receivable are down significantly as a result of our receiving the risk payments. Days claims payable were 40 days at the end of the quarter flat to the second quarter and up two days from 38 at the end of the 2007 third quarter.

Given the current market environment, I thought it would be helpful to briefly discuss our investment portfolio. The relative short duration of the liabilities in our business is causes us to be much more focus on liquidity than on investment yields.

In addition, the regulatory environment in the states in which we operate as well as our own self imposed investment policy restrictions have kept us in relatively safe investment vehicles. We have conducted a thorough review of all of our investments and believe that our potential exposure to investment impairments is fairly limited.

Our portfolio is primarily comprised a money markets, bank CDs and overnight suites and high quality corporate and municipal bonds. We are constantly monitoring the trading values and credit rating of our assets, including discussions with our investment managers as of the quality of the underlying assets in which our money markets are invested. We have avoided impairment thus far and hope to in the future.

Moving to the cash flow statement, operating cash flow for the nine months was the source of $152.6 million versus the source of $62.3 million in the prior year. We are pleased that operating cash flow year-to-date now exceeds net income at 1.7 times.

As the guidance based on what we see as a solid third quarter, we are increasing our earnings per share guidance to 2.10 to 2.20. Our health plans continue to focus a great of deal of their efforts on risk adjustment submissions and we anticipate substantial additional submissions to CMS in the fourth quarter, because of the potential impact of such submissions on premium revenue, we are maintaining a $0.10 range on our guidance for the year.

The major components of this updated guidance are year ending MA membership of 161,000 to 162,000, PDP membership of approximately 280,000 at year end. Total revenues of $2.1 billion to $2.2 billion, MA MLR added below 79% for the year on as reported basis, a PDP MLR of approximately 89% for the year and average fully diluted share count of 56.2 million shares. This assumes no additional share repurchases.

As this has been our practice since going public in 2006, we plan to issue our 2009 guidance early next year. Preliminary results from the annual open enrollment period in January 1st PMPM rates significantly influenced our annual projections. As such we believe we will review our January plan payment report received in late December is prudent prior to issuing annual guidance.

Operator, that concludes our prepared remarks, we can now open the lines for questions.

Question-and-Answer Session

Thank you. (Operator Instructions). We will go first to Darren Miller with Goldman Sachs.

Darren Miller -Goldman Sachs

Hi, good morning. Question if we were to look at PDP MLR for the year and back out California, New York. Do we have a sense of what that look like?

Herbert Fritch

We don’t have that on top of our heads. I mean we can get that data, but it will take a little work.

Darren Miller - Goldman Sachs

Okay. A broader question, as we look forward and we see the Medicare rates trending towards a 100% of fee-for-service, can you give a sense if you were to maintain your benefit structure, what would the MLR look like or maybe another way to look at that, is if you were to maintain your margin on your Medicare product. How much additional benefit if any would be provided versus the traditional Medicare product?

Herbert Fritch

Well, we still have room to provide additional benefits. We think that move to parity isn’t going to happen in a single year and that’s the open question is how quickly that would happen, but our best guess would be probably over three years and we think that would mean 2% to 3% for us. We think our exposures is a little less probably than most plans, but two to three point revenue reduction compared to what otherwise be and actually I mean I don’t think we expect a reduction in revenue, but the increase is will be two to three points less.

And we think we can manage through that trending in revenues and still, my expectation will be benefits aren't going to be as rich as they are today. But likely that will eliminate a number of other competitors and it won't be nearly as competitive marketplace, which is the environment we started in three MMA.

Darren Miller - Goldman Sachs

Can you provide a sense as far as, where is HealthSpring in relation to fee-for-service, I know, when you look at the industry as a whole Medicare Advantages, maybe 117% or so, where is HealthSpring? And then, if you were to go towards the 100%, can you quantify how much incremental benefit there is as far as, how much incremental benefit you would be able to offer versus traditional?

Herbert Fritch

HealthSpring I think is closer to around 110%, so we don't have 17 points to have to makeup. And the last time that I checked, I think our bids were coming in at about, before benefit adjustments, something like 82% of fee-for-service. So, I mean, I think we still have some room assuming, we continue to maintain that.

Darren Miller - Goldman Sachs

Great, and then one last question, the acquisition you made. How much did you paid for those, 2000 or less?

Herbert Fritch

It amounted to about--

Kevin McNamara

We paid approximately $7.2 million. So, it’s a little less than $2500 per member.

Darren Miller - Goldman Sachs

Terrific, thank you very much.

Operator

We'll take our next question from Josh Raskin, Barclays Capital.

Josh Raskin - Barclays Capital

Hi, thanks. Good morning. Just on the PDP, I think Kevin in your comments you mentioned that you'd expected improvement in the PDP MLR and I think we've heard two updates since the bids were released, where the cost are continuing coming at higher. So, is this just a factor of we fight ourselves out of the troubled markets or was there some recognition of this cost earlier. I'm just trying to figure how that MLR is going to improve next year?

Herbert Fritch

Josh, it’s a little bit of both of those I mean not getting under the benchmarks in California, New York where held help, but also when we did the bids our experience had been better than we'd seen in other players in this business and when we did our bids we gave consideration to what others were seeing. So, some of that was factored into. So, it’s a little bit above.

Josh Raskin - Barclays Capital

Okay. So, I mean maybe looking sensible. And then I guess just in the second question is just in terms of I guess the competition, Herb you suggested that if we see reimbursement pressures that may help eliminate some of the competition. But what are you seeing now one of the bigger competitors mentioned that the market have become very difficult to add a growth outlook for the next year that was a little bit lower than they have previously expected. So, I'm just curious, are you seeing anything maybe specifically in Florida or any of your markets at this point?

Herbert Fritch

Nothing and we feel, I suspected although I don't know exactly who are referring to, but I mean certainly the case where for the private fee-for-service guys. We don't have any of that. So, but I mean we feel we are probably at least as good often in most cases better in terms of our relative benefits this year compared to last, well for 2009 compared to 2008.

Josh Raskin - Barclays Capital

Okay. So, I don’t want to put words in your mouth, but it sounds like you feel more confident about the growth next year than what you have seen this year?

Herbert Fritch

We think we are really well positioned. We think this economy helps us in that people will put greater emphasis given their reduction in retirement accounts on the savings at a MA plan and provide the one negative and we really remains to seen where it nest out. The one negative is really the new rules that CMS imposed is going to limit somewhat our ability to generate as many leads. Now that also works for the competition. So, we do expect our dis-enrollment rates to be favorably impacted at the same time.

Josh Raskin - Barclays Capital

Yeah. That’s not.

Kevin McNamara

Relative to ourselves, Josh we don’t have in ’09, which we had a fair amount of it in ‘08 is currently exists and significant product changes in markets.

Josh Raskin - Barclays Capital

Right, okay. So, you’ll get sort of that benefit. I know that was first quarter I got you. And I’m sorry just last question, why no repurchases in the quarter?

Herbert Fritch

I mean Josh; we don’t have [10-D] five plan out there. So, we’ve been repurchasing, when the windows were open. And if you go back and look at trading activity, we just didn’t chose to repurchase during that window period.

Josh Raskin - Barclays Capital

Again maybe more specifically the stock have $15 today on the street, is disappoint, where it attractive enough at this point. I am just curious you guys had ample cash; cash flow was real strong, balance sheet not an issue.

Herbert Fritch

I mean we will look at that. The window doesn’t open until next Tuesday. So, if you go back into a little bit of homework. When the window is open for us last during as stock price was significantly higher than it is today.

Josh Raskin - Barclays Capital

Okay. Thank you.

Operator

We will take our next question from Justin Lake with UBS.

Justin Lake - UBS

Thanks. Good Morning. First question around the Medicare Advantage MLR, can you just, as it continues to come in better here, can you spikeout for us how much of that improvement is a function of higher revenue, maybe from risk course versus actual better utilization because of some of the clinical stuff you put in place this year?

Herbert Fritch

Well, to some extent the two are a little bit tied because we do a lot of arrangements that our percent of premium either risk sharing or capitation payments so that. But the revenue is probably the more, when we look back and what we would have projected I’d say the revenue increases is the main component and helped your cost are pretty much, where we projected them. The revenues are favorable.

Justin Lake - UBS

And you mentioned the capitation agreements; I know how well you are doing in Miami and Texas with some of those IPAs. Can you give us an idea of what the MLR is, is there a tremendous difference between the MLR achieved in the markets we had those IPA agreements versus, where you don’t [channel] numbers?

Herbert Fritch

In general some of the markets, Tennessee, we have parts of the networks in IPAs and parts not, but generally speaking we see, well, I don’t know, 4 to 5 points maybe more favorable MLRs, where we have IPAs in place and where we don’t.

Justin Lake -UBS

Okay.

Herbert Fritch

But it’s a market specific. I mean some of the markets seem to work out pretty well without as especially in the start up years, but ultimately we feel a lot more confident that is docs are engaged and helping us out that it’s well worth bonus payments and additional payments we make till.

Justin Lake - UBS

Sure, sure and how does your memberships went out between those that are covered by IPAs and those aren’t?

Herbert Fritch

Well, I'd say just thinking about it, but I’d say we are probably now in 60% to 70% range that are probably covered under some kind of an arrangement maybe trending more towards the 70.

Justin Lake - UBS

Got it.

Herbert Fritch

That tends to, we've increased that throughout the year, so we are getting more and more under all the time.

Justin Lake - UBS

Great, just last question around I know its early around '09 and trying to think about the broad source and I know membership is too early, but just thinking about, where you bid the MA and the PDP product and I think I was just trying to figure out, if you just think about the MLRs I mean typically I guess about think about '09 I think about PDP like we are improving. Can you tell us what your target MLR there was when you submitted the bids?

Herbert Fritch

On the PDP side?

Justin Lake - UBS

Yes. So, for this year you targeted at 84 I'm just wondering if you target returning to that number or did you feel like that's was the guess?

Herbert Fritch

We'll speak that in January. I mean we expect that when we come out of '09 guidance that the PDP, MLRs will be better than this year. That's all we ever wanted to say now.

Justin Lake - UBS

And what it would be safe to say that the Medicare Advantage MLR might be targeted close or back to back the 80% range. So, I know you look that long-term?

Herbert Fritch

Yes, probably fair.

Justin Lake - UBS

Okay, great. Thanks guys.

Operator

(Operator Instructions). We will go next to Charles Boorady with Citi.

Charles Boorady - Citi

Thanks. Good Morning. Just a question on the process that you go through between now the time you give us guidance on ‘09 is you tried to put your budget together to assess your product design and pricing and how that stacks up against your competitors.

I know early in the year before the bids were due, you talked about the gaming theory involved and trying to estimate what your competition might do and contemplate that when putting your own product design and pricing together. And so I’m wondering now that you can see what the rest of your competitors did for MA and PDP next year. What’s the process you go through to try to model out or whether you will be adversely selected against or not next year?

Herbert Fritch

Well, I don’t think we have a lot of concerns about adverse selection. I mean we are pretty mature in most of our markets and new the memberships are relatively small percentage of the total. Frankly, I think just by waiting we will be able to get a pretty good sense. We have got six weeks of knowledge between November 15 and January 1, as to how actual sales are running and how we are doing in the markets before we finalize budgets and guidance. So, that’s going to be the biggest, let me look at it isn’t going to be any abstract theory.

Kevin McNamara

The mechanical process Charles is, we have gone through a first phase of doing a ground up build of a budget, which the markets have gone through in tremendous detail and they are very close to their market what they expect from membership. We've done a rough modeling out of rates, which we pass down to them. And then, what we do is we just put our pencils down for a little bit. The markets obviously have all our attention focused from November 15 to December 31st on the open enrolment period. And then we sit down, when we get that payment report in late December in adjust to what's in there and then revisit everything.

Charles Boorady - Citi

I see. Some of your competitors have described the process, almost is a game of hot potato, where every year you wonder, it sounds like you might agree with the characterization and maybe not for yourself or for some others that. Every year we got to wonder, whether a flack of heavy drug users are going to find through cms.gov, who is got the best deal for the very expensive drugs that they are on. And that, this year Humana got 180 plus 1000 of them, it cost them over $1 a share and Humana is obviously very mature, very expert at Medicare.

And they didn't recognize until March of this year that happen, where as drug are, settled real time. So, and with MA, I imagined it’s even more difficult to know, it took Coventry till October of this year to realize full extend to which they, partially were adversely selected against. They had other issues as well.

So, I am just wondering, between now and January they have really enough time and is there anything more that you can do on a modeling standpoints or bringing in some out sided depended actuaries or anything else. To give you an earlier read of weather. In your case I think more relevant is the PDP your pricing, which is having an impact on the dual population and your benefit design is going to result in adverse selection or do we really need to wait at least March before we are 100% confident in what, the reasonable range of results for '09 might look like.

Kevin McNamara

Charles. I'll let Herb speak to the MA side, but on the PDP side that phenomenon and I do tend to agree with you a little bit, but that is predominantly in the voluntary business and we are not in that.

Herbert Fritch

I think we, I don't know we have recognized early on that there was a chance for adverse selection on especially on the drug coverage and we've had I guess tighter more limited formularies, a standard design at the limited formulary on the PDP side from day one and continue to. And generally speaking that’s reflected in our MA products too. So, we haven't had much issue. We feel pretty comfortable with the approach and it hasn't changed.

Charles Boorady - Citi

Humana are pretty confident that they are not going to keep these 180 plus 1000 really have drug usage that cost him over $1 a share this year. Can you be pretty confident that you are not going to be the recipient of them?

Herbert Fritch

Well, we are not in the voluntary business and I think most enrollment as Kevin was saying, most of that I believe is as voluntary membership and we don't even have plans for the voluntary membership. I mean we just have a standard plan that applies to the [duals and auto-signs].

Charles Boorady - Citi

Got it. Okay, great. Thank you very much for elaborating on that it’s top of mind for people and so I appreciate the extra color on it.

Operator

We’ll go next to Carl McDonald with Oppenheimer.

Carl McDonald - Oppenheimer

Thank you. One of the swing factors for earnings actually it was from EPS basis will be the share count does that relates to the completion of the two additional LMC centers. Can you give us an update on where they stand in that process and when you think you would recognize the additional and then I got two points--

Kevin McNamara

The substance to the agreement is there due to bring those centers online prior to the ‘09 open enrollment period. I guess it would be the 10 open enrollment period. So, they are targeted to come online in the October-November timeframe, somewhere in then. I doubt they are going to bring them up significantly ahead of that.

I believe we’ve got 2.7 million shares in escrow. So, the actual accounting guidance is you start counting them at the point at which you are reasonably assured that they are going to come up. And so they are probably not going to go into the share count until second half of ‘09 and probably more weighted towards the fourth quarter of ‘09.

Carl McDonald - Oppenheimer

Okay. So, probably more and more of an impact as you think about 2010 earnings than 2009?

Thanks. Good morning. Can you just give us the PMPM for the Medicare year-over-year ex the impact from Leon?

Herbert Fritch

I believe it was 12%. I think it was in our release.

Brian Wright - Banc of America Securities

Ex Leon?

Kevin McNamara

For the nine month that was up 14% ex-Florida.

Brian Wright - Banc of America Securities

And for the third quarter?

Herbert Fritch

Third quarter it was just 12% ex-Florida.

Brian Wright - Banc of America Securities

Thanks.

Operator

(Operator Instruction). And Mr. Fritch, it appears there are no further questions at this time. So, I will turn the call back over to you for any closing remarks.

Herbert Fritch

Well, thanks for your time and interest and we will look forward to the next quarter's call. Thank you.

Operator

Thank you ladies and gentlemen. That does conclude today's call. You may now disconnect.

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